The China-Africa Oil Connection

Video Transcript

Hi, this is Rudy Martin for Uncommon Wisdom Daily.

As crude oil prices continue to rise, and existing reserves become harder and harder to extract, explorers are looking for new, untapped deposits. And they’re finding them — in Africa.

Just this week, an oil field was discovered in the waters off the West African nation of Sierra Leone, the third such find there since 2009. Offshore oil exploration in Namibia has also spiked. And one of the largest natural gas discoveries in a decade was recently made in Mozambique.

Currently, upstream oil production in Africa is dominated by five countries: Nigeria, Libya, Algeria, Egypt and Angola. Together, they account for 85% of the continent’s oil production, but that number may decrease as more deposits are found throughout the region.

Along with that increased supply, we’re seeing increased demand — not just from industrialized nations but also from emerging markets such as China. China’s booming economy has averaged 9% growth a year for the last two decades. And that kind of expansion requires massive amounts of energy to sustain.

China became a net importer of oil less than 20 years ago, but it’s already the world’s second-largest consumer behind the United States. According to the International Energy Agency, China will surpass the U.S. in oil consumption by the end of this decade, and nearly triple its current import levels by 2035.

The country still gets nearly half of its crude oil from the Middle East, but it’s increasingly looking to Africa to meet its growing energy needs. In 2010, 30% of China’s oil imports came from the continent, making it the second-largest source of imports behind the Middle East.

It’s likely that as the world’s largest oil and gas companies continue to boost their production in Africa, the continent will gain greater stature in the industry, and its relationship with China will continue to expand.

I’m Rudy Martin for Uncommon Wisdom Daily. Thanks for watching.

Rudy Martin, editor of Global Trend Trader, is the President at Acamar Global Investments, with 25 years of experience serving institutions and high net-worth individuals.

Rudy started his investment career in 1983, co-managing a $2 billion private investment portfolio for Transamerica. Later, he went on to Wall Street as an equity analyst for Dean Witter and traveled globally, serving major institutional equity investors. In 1995, he joined Fidelity Investments as a Senior Investment Analyst for a series of multibillion-dollar fund portfolios.

During his career, Rudy has received awards for institutional investing and is widely quoted in the financial press and on television about topics related to global investing and emerging markets. For more information on Global Trend Trader click here.